Switzerland: Safe Haven during Crisis
If we have learned one thing from COVID-19, it is that life is unpredictable. A crisis can hit at any time and without notice. One thing you can do to protect yourself is to bring part of your wealth offshore. There are several suitable countries, but we firmly believe that Switzerland should be your number one choice. Let me share a little bit about Switzerland and why it is such a great country for wealth protection.
History and Expertise
A staggering one-third of the world’s private wealth resides in Swiss banks.
Switzerland has a long history as a financial center. Banks were established on Swiss territory in the 16th century and Swiss banks were some of the primary financiers of the industrial revolution. In 1815, Switzerland’s unique status as a banking haven was acknowledged by international treaty. Over the centuries, Swiss banking clients have included many of the world’s wealthiest individuals, including virtually all of Europe’s royal families.
The long history of Swiss banking has given rise to a class of professional bankers, who, upon completion of university, undergo training in foreign exchange, portfolio management, securities trading and many other disciplines. At the same time, bankers are given increasing responsibilities with only those demonstrating aptitude and integrity being permitted to deal with private clients and their assets. The result of this rigorous process is the creation of the world's most knowledgable and capable financial professionals.
Politics and Neutrality
Another reason why wealthy clients from all over the world trust their assets to Switzerland is because of the nation’s long tradition of political neutrality. Switzerland’s political neutrality avoided both World Wars. And it continues to the present day. Switzerland has repeatedly rejected membership in the European Union due to concerns that doing so would compromise its neutral status and force it to take sides in international disputes. While Switzerland has good relations with the European Union, they are an island of independence. This is the main reason that the Bank of International Settlements, an organization that facilitates cooperation among the world's central banks, is headquartered in Basel, Switzerland.
Economy and Wealth
Switzerland has one of the world's most advanced free economies. It has the second highest GDP per capita in the world. At the end of 2015 Swiss GDP per capita stood at CHF 77,943 (approx. USD 80,900). The public debt-to-GDP ratio in Switzerland has fallen considerably in recent years, from 54.6% in 1998 to 34.7% in 2014. Switzerland has the lowest rate of value-added tax in Europe. 7.7% is levied on most goods and services, 3.7% on accommodation services, and 2.5% on basic necessities and other everyday items.
The economy of Switzerland also ranks first in the world in the 2015 Global Innovation Index and the 2017 Global Competitivness Report. According to United Nations in 2016 Switzerland is the third richest landlocked country in the world. Switzerland invests over CHF 16 billion in research and development annually. This rate of investment is equivalent to around 3% of its GDP. This makes Switzerland one of the top spender on research and development in the world.
Laws and Protection
Lastly, Swiss banks are subject to some of the highest capital reserves requirements in the world. The Swiss government offers unparalleled guarantees on funds deposited within Switzerland in case of a bank’s insolvency. The custodian banks carry all accounts in the name of their clients. Securities are traded and held in the bank’s name but segregated from the bank’s own assets. Through the Deposit Protection Scheme, in the extremely unlikely event that a bank is declared bankrupt, deposits of up to CHF 100’000 (equivalant to approx. USD 104'000) per client enjoy privileged treatment. Unlike cash deposits, assets lodged for safekeeping (such as shares, bonds and other securities) are client property, and are immediately ring-fenced and released to clients separately from the bankruptcy proceedings. They, therefore, do not form part of the bankruptcy estate at any time. This reduces the risk of losses suffered significantly.
Switzerland’s exceptional status has developed over time. It is one of a kind.
- The great stability of the Swiss Confederation has its roots in a highly developed conservatism.
- Switzerland has experience in surviving powerful neighbors.
- Respect for privacy and discretion is part and parcel of the Swiss national mentality.
- Confidentiality is a principle that is deeply engrained in education.
- In Switzerland, the citizen controls the state, not the other way around.